R&D in the Pharmaceutical Industry: A World of Small Innovations

@article{Ganuza2009RDIT,
title={R&D in the Pharmaceutical Industry: A World of Small Innovations},
author={Juan-Jos{\'e} Ganuza and Gerard Llobet and Beatriz Dom{\'i}nguez},
journal={Management Science},
year={2009},
volume={55},
pages={539-551}
}

It is commonly argued that in recent years pharmaceutical companies have directed their R&D towards small improvements of existing compounds instead of more risky drastic innovations. In this paper we show that this bias towards small innovations is likely to be linked to the lack of market sensitivity of a part of the demand to changes in prices. Compared to their social contribution, small innovations are relatively more profitable than large ones because they are targeted to inelastic… CONTINUE READING